Basing and Breakouts
Many of the factors that make stocks look good come into play after a trend has been established. If a stock has been trading quietly in a flat range for a period of time, it may be undergoing a process known as accumulation, where the supposed “smart money” is buying shares. The general public has not caught on to this activity, so the price remains stable.
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Many of the factors that make stocks look good come into play after a trend has been established. |
At some point, either through technical analysis, fundamental reports, or news events, the stock breaks free from the range. This breakout signals a technical buy signal and the new rising trend is underway. The bigger the base, the stronger the rally can be.
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